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thanks! Taj, your newly appointed boss, has tasked you with evaluating the following financial data for Extensive Enterprise Inc. to determine how Extengive's value has
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Taj, your newly appointed boss, has tasked you with evaluating the following financial data for Extensive Enterprise Inc. to determine how Extengive's value has changed over the past year. The investment firm for which you work will make a positive (or "buy") recommendation to its investing clients If Extensive's value has increased over the past year, a neutral (or "hold") recommendation if the value has remained constant, or a negative (or "seli") recommendation if the value has decreased. He has recommended that you use several metrics to ascertain how the fim's value has changed, and he has provided you with the following income statement and balance sheet. \begin{tabular}{lcc} Interest expense & 36,000 & 25,000 \\ EBT & $162,000 & $120,000 \\ Tax expense (40\%b) & 64,800 & 48,000 \\ Net income & $97,200 & $72,000 \\ Common dividends & $58,320 & $43,200 \\ Addition to retained earnings & $38,880 & $28,800 \\ I Excludes depreciation and amortization & & \\ \hline \end{tabular} December 31, Year 2 \begin{tabular}{lll} \hline Assets: & Year 2 & Year 1 \\ Cash and cash equivalents & $76,950 & $57,000 \\ Receivables & 256,500 & 190,000 \\ Inventory & 448,875 & 332,500 \\ Current assets & $782,325 & $579,500 \\ Net fixed assets & 500,175 & 370,500 \\ Total current assets & $1,282,500 & $950,000 \end{tabular} \begin{tabular}{lll} Accounts payable & $192,375 & $142,500 \\ \hline Accruals & 125,044 & 92,625 \\ Notes payable & 269,325 & 199,500 \\ \hline Total current liabilities & $586,744 & $434,625 \\ Long-term debt & 246,881 & 182,875 \\ Total liabilities & $833,625 & $617,500 \\ Common stock (\$1 par) & 89,775 & 66,500 \\ Retained earnings & 359,100 & 266,000 \\ Total equity & $448,875 & $332,500 \end{tabular} To faclitate your analysis, complete the following table, and use the results to answer the related questions. (Note: Round all percentage change answers to two decimal places. If a dollar value is below $100, round your answer to two decimal places. If your answer is negative use a minus (-) sign.) Using the change in Extensive's EVA as the decision criterion, which type of investment recommendation should you make to your clients? A sell recommendation A hold recommendation Taj, your newly appointed boss, has tasked you with evaluating the following financial data for Extensive Enterprise Inc. to determine how Extengive's value has changed over the past year. The investment firm for which you work will make a positive (or "buy") recommendation to its investing clients If Extensive's value has increased over the past year, a neutral (or "hold") recommendation if the value has remained constant, or a negative (or "seli") recommendation if the value has decreased. He has recommended that you use several metrics to ascertain how the fim's value has changed, and he has provided you with the following income statement and balance sheet. \begin{tabular}{lcc} Interest expense & 36,000 & 25,000 \\ EBT & $162,000 & $120,000 \\ Tax expense (40\%b) & 64,800 & 48,000 \\ Net income & $97,200 & $72,000 \\ Common dividends & $58,320 & $43,200 \\ Addition to retained earnings & $38,880 & $28,800 \\ I Excludes depreciation and amortization & & \\ \hline \end{tabular} December 31, Year 2 \begin{tabular}{lll} \hline Assets: & Year 2 & Year 1 \\ Cash and cash equivalents & $76,950 & $57,000 \\ Receivables & 256,500 & 190,000 \\ Inventory & 448,875 & 332,500 \\ Current assets & $782,325 & $579,500 \\ Net fixed assets & 500,175 & 370,500 \\ Total current assets & $1,282,500 & $950,000 \end{tabular} \begin{tabular}{lll} Accounts payable & $192,375 & $142,500 \\ \hline Accruals & 125,044 & 92,625 \\ Notes payable & 269,325 & 199,500 \\ \hline Total current liabilities & $586,744 & $434,625 \\ Long-term debt & 246,881 & 182,875 \\ Total liabilities & $833,625 & $617,500 \\ Common stock (\$1 par) & 89,775 & 66,500 \\ Retained earnings & 359,100 & 266,000 \\ Total equity & $448,875 & $332,500 \end{tabular} To faclitate your analysis, complete the following table, and use the results to answer the related questions. (Note: Round all percentage change answers to two decimal places. If a dollar value is below $100, round your answer to two decimal places. If your answer is negative use a minus (-) sign.) Using the change in Extensive's EVA as the decision criterion, which type of investment recommendation should you make to your clients? A sell recommendation A hold recommendation Step by Step Solution
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